Government officials and policemen around the world are worried about the Internet, but not in the way you might think. Certainly, the authorities are concerned about the presence of pornography, inaccurate and defamatory information, the problems of copyright and intellectual property.

But these concerns pale in comparison to its possible use for money laundering or large-scale tax evasion. At two separate conferences this week, one in Geneva sponsored by the UN, and the annual get-together of financial crime experts at Cambridge, the subject of Internet banking and fraud will come up. The conclusion reached is expected to be that Internet banking is a criminal's dream.

Internet banking is regarded as a holy grail by many commercial bankers. In the world's financial hubs, the city centre offices are merely a showroom, with processing done in factory- like conditions in cheap locations. The attractions of an electronic shopfront are obvious. Already several big banks have begun on-line banking services.

And there is a new crop of Internet banks. One of them, the European Union Bank, was recently closed by regulators in Antigua. Another Internet bank claims to operate from Western Samoa but the web site for the Central Bank there lists only two licensed banks, neither of which is the claimed Internet one. It is operations like these Internet banks, which are linked with offshore banking, that is causing the greatest concerns.

Offshore centres are disliked by tax officials and enforcement agencies because they offer layers of secrecy that make it difficult for investigators. In one case, a court in Milan has appointed an investigator who has identified 180 connected offshore companies through which money has moved over a short period, as criminals launder millions of pounds of bribes.

The offshore community is taking to Internet banking and associated financial services for several reasons. One is that money retained offshore is under most revenue laws taxed only when repatriated, so the creation of an offshore trust can be used to ramp up higher rates of gain than an onshore investor would get on the same markets.

The International Business Corporation (IBC), in which the lawyers act as nominee shareholders and officers with the whole arrangement covered by professional secrecy, has proved an effective tool for criminals. The IBC is a separate legal entity holding its own bank account. Under anti money-laundering laws, there is a need to identify the customer, but in the case of a company, this is done by production of a certificate of incorporation. There are no inquiries made as to the ownership of the company and the funds that come into it.

The Internet-based European Union Bank offered the formation of an IBC and an accompanying bank account for $10,000. Until its web site was closed, it said the IBC would be identified for the purpose of anti-money laundering provisions.

Also, where profits are made from the sale of information, the point of supply may be different from the point of delivery. Information generated in one country, sold to an associated company offshore for a low price and then re-sold to customers in the original country at a high price means that the bulk of the profit can be kept offshore in a low tax environment. This is an example of "transfer pricing" - seen as a threat for the revenue- generating powers of governments. As a greater part of wealth generation becomes information-based, the opportunity to keep profit offshore will become a powerful motivation for information-based businesses. Although such schemes are often seen as immoral, for the moment they do not appear to be illegal.

When the offshore banking facility is accessible by Internet, payments can be made to any other bank account under the control of the account holder. This is an open door for anonymous banking with the same convenience as using the high street branch.

Yet more devious is use of the account with a debit or deposit backed credit card from clearing houses such as Visa. Where spending can be done away from the eye of tax authorities, cash can be withdrawn from a hole in the wall.

The opportunities for more legitimate business will increase when payment systems can be made more secure and the buyer and seller properly identified. It is possible to do this by a mix of paper-based and Internet facilities. For example, an account backed with a direct debit on a card or bank account can be opened using traditional methods. Anyone ordering from a web site can place the order with reference to their account number and no personal or financial details need be transmitted.

A by-product of security improvements might be a way of tracking Internet- based cash movements and reining in the activities of money launderers and tax dodgers. Until that happens, however, it looks as if technology will remain one step ahead of law.